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Date
May 5, 2026, 4:30 p.m. ET
Call participants
- Chief Executive Officer — Bradford Todd Nordholm
- President and Chief Operating Officer — Zachary N. Carpenter
- Chief Financial Officer and Treasurer — Matthew Pullins
- Senior Director of Investor Relations — Jalpa Nazareth
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Takeaways
- Outstanding Business Volume -- $34.8 billion at quarter end, setting a new company record and reflecting $1.5 billion in net new volume for the period.
- Total Revenue -- $110 million, up 14% year over year, driven by broad-based segment growth and disciplined funding execution.
- Core Earnings -- $52 million, another all-time high, equal to $4.74 per diluted share.
- Net Effective Spread -- $102 million, up $12 million year over year and $600,000 sequentially, with the percentage at 116 basis points versus 117 basis points last year and 122 basis points in Q4; decrease attributed mainly to fewer days in the quarter and product mix shift.
- Farm & Ranch Loan Purchase Growth -- $384 million net loan purchase growth, drastically above $54 million for the same period last year, against a backdrop of typically high seasonal repayments.
- Farm & Ranch Applications -- Approvals approached $1 billion, nearly 30% above the previous record in 2025, indicating elevated demand and an expanded seller base.
- Farm & Ranch AgVantage Securities -- Portfolio increased $325 million, following new $4.3 billion facility funding with a large counterparty initiated in late 2025.
- Corporate Ag Finance Volume -- Over $2 billion in outstanding business, up approximately 5% sequentially and 9% year over year.
- Infrastructure Finance -- Sequential volume up $717 million (6%) to $12.6 billion, with all segments posting net growth.
- Renewable Energy Segment -- Grew $445 million (18%) to $2.9 billion, with volume driven by transactions approved in late 2025 and closing in 2026, as well as ongoing construction activity tied to regulatory incentives.
- Broadband Infrastructure -- Net growth of $158 million to $1.7 billion, with nearly 70% of new volume attributed to data center-related demand and 87% of newly approved broadband deals linked to data centers.
- Provision for Credit Loss -- $4.3 million expense recorded, with $3.4 million attributed to new volume (mainly Renewable Energy) and $900,000 to credit migration.
- Allowance for Losses -- $40.1 million at period end, up $2.1 million from year end and $14.7 million year over year, primarily reflecting portfolio growth and isolated credit migration.
- Delinquency and Asset Quality -- Ninety-day delinquencies at 52 basis points, up from 40 in Q4 and improved from 54 basis points a year ago; substandard assets reached 1.87% of the portfolio, up from 1.71% at year end, with growth in Agricultural Finance partially offset by improvements in Infrastructure Finance.
- Return on Equity (ROE) -- CFO Matthew Pullins reported, "we printed 17% for the quarter" and aims to maintain business within that range.
- Capital Position -- Core capital rose $27 million to $1.7 billion, exceeding statutory requirements by $663 million (62%), while the Tier 1 capital ratio was 13%, compared to 13.3% at prior year end.
- Expense Management -- Revenue growth surpassed expense growth by nearly 4 percentage points year over year; the efficiency ratio target remains at 30%.
- Common and Preferred Capital Return -- $32 million returned through dividends and modest share repurchases.
- Tax Credit Impact -- A $4.2 million income tax benefit was recorded related to the purchase of $45 million in renewable energy investment tax credits, with $30 million in additional carryback capacity expected to be used in the following quarter.
Summary
Federal Agricultural Mortgage Corporation (AGM +0.44%) emphasized growth across diversified business lines, especially in Infrastructure Finance, with sequential momentum attributed to renewable energy and data center demand. Management cited a proactive balance sheet strategy, including rate-neutral positioning, innovative hedging initiatives, and callable debt actions designed to underpin future spread durability. Strategic focus was placed on disciplined underwriting and expanding relationships with financial institutions, underlining resiliency despite volatility in input prices and global trade tensions. Management also disclosed that CEO succession is progressing ahead of schedule, signaling stable leadership. The company remains intent on broadening its mission-aligned impact and selectively targeting opportunities within capital-intensive, higher-return market segments.
- Management described mix shifts toward Farm & Ranch AgVantage as reducing net effective spread percentage while still being accretive to overall ROE.
- Investment in business development, operations, and technology was identified as a key catalyst for segment expansion, especially in Renewable Energy and Broadband Infrastructure.
- Credit risk trends were reviewed, with allowances and delinquency increases characterized as driven by portfolio growth and seasonal payment schedules rather than material deterioration.
- Portfolio layer method hedging was introduced this quarter and management expects its impact on spread accretion to grow over time.
- Management reported that over 80% of data center tenant exposure is to two to four top investment-grade hyperscalers, with all transactions requiring firm power, water, and tenant commitments before funding.
- CEO Nordholm specifically stated, "Federal Agricultural Mortgage Corporation has never been in a stronger position than it is today," highlighting leadership confidence in the firm's outlook.
- The company sees its diversified model and capital strength as allowing for ongoing revenue stream growth even under volatile credit and macroeconomic environments.
Industry glossary
- AgVantage Securities: Collateral-backed securities issued by Federal Agricultural Mortgage Corporation, often with guarantees, enabling liquidity for agricultural loan portfolios.
- Net Effective Spread: The difference between the yield earned on interest-earning assets and the cost of funding those assets, net of certain adjustments, reflecting spread profitability.
- Portfolio Layer Method Hedging: An interest rate risk management strategy applying hedge accounting to designated layers of a closed portfolio of prepayable assets.
- Substandard Assets: Loans or assets classified as carrying above-average credit risk but not yet categorized as non-performing, indicating elevated monitoring requirements.
- Nonaccrual Assets: Assets on which income is no longer accrued due to concerns over collectability of principal or interest.
Full Conference Call Transcript
Jalpa Nazareth: Good afternoon, and thank you for joining us for our first quarter 2026 earnings conference call. As we begin, please note that the information provided during this call may contain forward-looking statements about the company’s business, strategies, and prospects. These statements are based on management’s current expectations and assumptions and are subject to risks and uncertainties that could cause our results to differ materially from those projected. All forward-looking statements are based on information available to Federal Agricultural Mortgage Corporation as of today’s date, and Federal Agricultural Mortgage Corporation assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
Please refer to Federal Agricultural Mortgage Corporation’s 2025 Annual Report on Form 10-K and subsequent SEC filings for a full discussion of the company’s risk factors. On today’s call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in the company’s most recent Form 10-Q and earnings release posted on our website. Joining me today are Chief Executive Officer, Bradford Todd Nordholm; our President and Chief Operating Officer, Zachary N. Carpenter; and our Chief Financial Officer and Treasurer, Matthew Pullins. At this time, I will turn the call over to our CEO, Bradford Todd Nordholm.
Bradford Todd Nordholm: Thanks, Jalpa. Good afternoon, everyone, and thank you for joining us. I also want to thank everyone who joined our Investor Day event in New York City. We appreciate the strong engagement and the opportunity to spend more time discussing our strategy, performance, and outlook. Our first quarter 2026 was outstanding, reflecting continued acceleration in business volumes from the fourth quarter of 2025. We delivered a record-setting quarter with business volume, quarterly revenue, and quarterly core earnings all reaching all-time highs, underscoring the strength of our business model and disciplined execution across our organization. Outstanding business volume approached 35 billion dollars, revenue totaled approximately 110 million dollars, and core earnings totaled approximately 52 million dollars.
Our diversified business model, strong capital position, and disciplined risk management allow us to provide vital liquidity to American agriculture and rural infrastructure sectors through all economic cycles. Demand for our products remains robust, our customer relationships continue to deepen and expand, and our mission-driven approach continues to resonate across rural America and motivates our talented employees. With that, I will turn the call over to our President and Chief Operating Officer, Zachary N. Carpenter, to walk through our operating results in more detail.
Zachary N. Carpenter: Thank you, Brad, and good afternoon, everyone. The first quarter was an excellent start to the year, with strong results and meaningful momentum across every aspect of our business. Total revenues increased 14% year-over-year with strong contributions from outstanding business volume growth paired with disciplined funding execution and stable asset credit quality across all of our platforms. We delivered 1.5 billion dollars in net new business volume in the first quarter, bringing total outstanding volume to a record 34.8 billion dollars as of quarter end. Broad-based growth this quarter was supported by a strong pipeline, particularly in the Farm & Ranch segment, where we approved loans for 2026 approaching 1 billion dollars, almost 30% above 2025, our previous record.
Sustained customer demand across our products continues to be underpinned by disciplined underwriting and risk management. Our Agricultural Finance outstanding business volume grew 777 million dollars in the first quarter, with the Farm & Ranch segment accounting for 675 million dollars of the net growth. Loan purchase activity in Farm & Ranch accelerated meaningfully in 2025 and has continued throughout 2026.
Specifically, we saw net growth of 384 million dollars for the first three months of this year, compared to only 54 million dollars of Farm & Ranch loan purchase net growth in the same period last year, significantly outpacing the seasonally large number of loan repayments we typically see in the first quarter due to the January 1 payment date. We are operating at an elevated pace for new volume and expect loan purchase growth to continue as lenders seek liquidity, primarily driven by the balance between diversifying from high-cost deposit needs due to continued strong loan growth and a focus on capital efficiency.
In addition, agricultural borrowers continue to face tighter conditions driven by higher input costs, trade and tariff concerns, and low commodity prices. We remain proactive in discussions with our customers to ensure we find the right solutions to support their liquidity and capital needs, as well as understanding their borrowers’ liquidity needs in a challenging and volatile operating environment. Our Farm & Ranch AgVantage securities portfolio grew 325 million dollars in 2026. As we discussed on our prior call, this increase reflects the additional fundings we anticipated after closing a new 4.3 billion dollar facility with a large agricultural counterparty in late 2025.
We believe we are on track to return to sustained net growth in this product set as we work closely with our counterparties to determine the right structure for providing incremental liquidity based on current market conditions. The Corporate Ag Finance segment delivered solid results, ending the quarter with over 2 billion dollars in outstanding business volume, up approximately 5% sequentially and 9% year-over-year. Deal flow activity in the broader agribusiness market was relatively muted during 2026 as companies continue to navigate a volatile market coupled with global tensions impacting trade and inflation. Looking ahead, we have seen a modest pickup in second quarter deal flow activity, primarily reflecting refinancing transactions.
We are also starting to see more indications of potential mergers and acquisition activity, which could result in an increase in volume opportunities as we support the food, fuel, and fiber supply chain. Turning to our Infrastructure Finance line of business, outstanding business volume increased 717 million dollars sequentially, or 6%, to 12.6 billion dollars as of quarter end, with all three segments contributing to net growth. This continues similar themes we saw in 2025, specifically strong interest and investment in data center construction, broadband expansion, and the construction and completion of renewable energy projects, reflecting the overall need for significant energy generation and transmission capacity in rural America.
Net growth in our Power & Utility segment this quarter was 115 million dollars, largely due to strong loan purchase activity supporting investment needs of rural electric generation, transmission, and distribution cooperatives. We continue to see steady demand for capital in this segment, as borrowers invest in system upgrades and modernizations to support significant increases in electrification demand. Our Renewable Energy segment grew 445 million dollars, or 18%, to 2.9 billion dollars as of quarter end. Growth primarily reflected transactions approved in late 2025 that subsequently closed in 2026, in addition to a strong deal pipeline and accelerated construction deadlines.
Looking ahead, while we anticipate the continuation of the construction-related rush in the first half of this year tied to the July 4 construction start time frame described in H.R. 1, we believe growth in this segment will continue well into next year, as a substantial need for new power generation will continue to drive growth. Currently, deal flow remains robust, allowing us to be selective with our capital deployment to pursue deals that are appropriately structured, with strong counterparties, underscoring the strength of our reputation in the market.
While the industry is facing potential evolution in the near future as tax and other incentives are set to expire, we project growing demand for energy to position the industry for continued growth, as the underlying economics of these projects remain highly competitive even without tax incentives. Alternate generation capacity takes years to develop, and we expect capital structures and power purchase agreement pricing to adjust as H.R. 1 incentives are phased out. Accordingly, we expect to continue to participate in renewable energy transactions for both new projects and refinancings of good existing projects.
Beyond 2027, we anticipate stable growth in this space as more market-driven rather than policy-driven, as the underlying driver remains a massive surge in power demand requiring significant new power supply. Broadband infrastructure also posted strong quarterly results with net growth of 158 million dollars, ending the period at 1.7 billion dollars outstanding, with nearly 70% of the volume growth tied to data center-related demand. We are seeing robust demand for data centers quarter-to-date, as 87% of new deals approved in our broadband infrastructure pipeline are data center related, a reflection of the ongoing expansion of artificial intelligence, cloud storage, and enterprise digitization.
While this segment has grown substantially, we remain disciplined in maintaining geographic and sponsor diversification with a continued focus on well-capitalized, investment-grade hyperscaler tenants. We are mindful of the macro backdrop with uncertainties stemming from interest rates, trade policy, and regulatory shifts. Our diversified portfolio, strong capital position, and disciplined underwriting give us confidence in our ability to continue delivering consistent results. We are also closely monitoring the recent spike in global energy prices, which has pushed fuel and fertilizer costs higher ahead of the growing season.
While higher energy prices have historically supported higher commodity prices, the net impact on producer margins will depend on the duration of the disruption, the degree to which growers lock input costs in advance, and whether commodity prices adjust to offset higher production costs. Regardless of how these dynamics unfold, we believe Federal Agricultural Mortgage Corporation is very well positioned to navigate the environment. We are extremely proud of the results this quarter and excited about what lies ahead for the balance of 2026 and beyond. The momentum from 2025 has not only continued, but in several areas accelerated, reinforcing our confidence in the outlook and durability of our business model.
We are dedicated to broadening the pursuit of our mission in response to the evolving economic landscape in rural America. This proactive business diversification continues to deliver meaningful benefits to the communities and industries we serve, as evidenced by the strong growth across all our portfolios. With that, I will turn it over to Matthew Pullins, our Chief Financial Officer and Treasurer, to review our financial results in more detail.
Matthew Pullins: Thank you, Zach. Before turning to our results, I would like to share a few reflections from my early experience at Federal Agricultural Mortgage Corporation. What has stood out most to me is the tangible positive impact our organization has on rural America, something that resonates deeply with me given my personal connection to agriculture. I have also been struck by the dedication, focus, and execution of our team, whose commitment to our mission is evident every day.
It is exciting to be part of an organization that operates from such a position of strength, supported by excellent credit fundamentals, disciplined cost management, exceptional access to the capital markets, along with the unique strategic funding advantages that come with being a government-sponsored enterprise. Looking ahead, the opportunities for growth are exciting, and it is energizing to be part of the momentum we are building. Turning to our results, we had an exceptional start to 2026. First quarter results were record setting by every measure: nearly 35 billion dollars in outstanding business volume, 110 million dollars in revenue, and 52 million dollars in core earnings, or 4 dollars and 74 cents per diluted share.
This quarter’s record results were driven by several distinct financial performance factors. Net effective spread reached a record 102 million dollars in 2026, an increase of 12 million dollars year-over-year and 600,000 dollars from 2025, our prior quarterly record. On a percentage basis, net effective spread was 116 basis points, modestly below 117 basis points in the year-ago period and 122 basis points in the fourth quarter. Quarter-over-quarter spread compression was driven primarily by fewer days in the period, which disproportionately impacts revenue from our fastest-growing, highest-spread segments. In addition, we saw a mix shift toward growth in our lower-spread Farm & Ranch AgVantage securities and somewhat lower contribution from the investment portfolio.
Even with that dynamic, net effective spread dollars grew again this quarter, reinforcing the durability and earnings power of our expanding, increasingly diversified portfolio. Our net effective spread performance reflects disciplined, proactive, and purposeful balance sheet management. The foundation of our approach is positioning the balance sheet to be largely rate agnostic, underpinned by a very short duration profile and a strong interest rate risk management framework. Our differentiated funding advantage remains a key strength, allowing us to access liquidity at highly competitive levels. Within this rate-neutral posture, we remain strategic and nimble, actively evaluating and capturing opportunities to enhance long-term economics when market conditions are favorable.
Together with our ongoing use of innovative hedging strategies, these actions demonstrate our ability to manage risk effectively while consistently supporting financial performance. Partially offsetting strong earnings growth this quarter was an increase in compensation and benefits, primarily driven by increased headcount and seasonal factors. We maintain our deliberate and balanced approach to expense management and will continue making targeted investments in business development and in our operational and technology platforms to support future growth and scalability while managing expenses within our long-term efficiency ratio target of 30%. Moreover, this quarter, our revenue growth outpaced expense growth by nearly four percentage points compared to the prior-year period, reflecting sound execution and the strength and scalability of our operating platform.
Also contributing to our first quarter 2026 core earnings was a 4.2 million dollar income tax benefit from the purchase of 45 million dollars of renewable energy investment tax credits, which was fully recognized in the quarter. As of quarter end, we had approximately 30 million dollars of remaining capacity to utilize additional credits through carrybacks to prior-year federal income tax liabilities. Subject to market conditions, we expect to largely utilize that remaining carryback capacity in the second quarter, and we will continue to evaluate additional tax credit purchase opportunities on a current-year, go-forward basis.
As discussed at length last quarter, Federal Agricultural Mortgage Corporation operates a comprehensive credit framework that aligns with our risk appetite, while accounting for the unique risks present within each of our five operating segments. While credit risk is inherent in our business, we believe our disciplined credit framework and proactive risk management enable consistent execution of our mission to deliver liquidity to the agriculture and rural infrastructure markets. Turning to first quarter credit and asset quality results, we recorded 4.3 million dollars of provision for credit loss expense in 2026.
The provision reflects 3.4 million dollars attributable to new volume growth across all our segments, particularly in the Renewable Energy segment, and 900,000 dollars related to credit migration across the portfolio. Credit migration this quarter reflects the ongoing discipline of our portfolio management process. As we do each quarter, we conducted a comprehensive review of our portfolios. Certain credits experienced deterioration—specifically in agricultural storage and processing and select permanent plantings exposures—and required additional reserves. Others demonstrated meaningful improvement through collateral sales and improved borrower performance, and therefore resulted in reserve releases. The net effect was a largely offsetting outcome.
Allowance for losses was 40.1 million dollars as of 03/31/2026, reflecting a 2.1 million dollar increase from year-end 2025 and a 14.7 million dollar increase from the same period a year ago. The sequential increase primarily reflects the cumulative impact of portfolio growth and select credit migration, partially offset by charge-offs recorded during the quarter. On a year-over-year basis, the increase is consistent with significant growth in outstanding business volume over the past twelve months. As of quarter end, the total allowance represented 15.4% of nonaccrual assets, compared to 16.0% as of 12/31/2025, and 12.9% as of the year-ago period.
As we have discussed previously, allowance for losses as a percentage of nonaccrual assets is a useful gauge of reserve adequacy relative to loans where full collection is unlikely. We remain comfortable with our allowance levels given the strength of the underlying collateral. Ninety-day delinquencies were 52 basis points at quarter end, up from 40 basis points in the fourth quarter of 2025, and an improvement from 54 basis points in the year-ago period. The sequential increase is consistent with the seasonal pattern we have historically observed in our portfolio. Delinquency levels tend to be higher at the end of the first and third quarters, reflecting the annual and semiannual payment dates on the majority of Farm & Ranch loans.
Total substandard assets as a percentage of our entire portfolio were 1.87% this quarter, up from 1.71% at year end, with the increase concentrated in credit downgrades in the Agricultural Finance line of business. Infrastructure Finance substandard assets declined sequentially this quarter due to improvements in the Renewable Energy segment. Federal Agricultural Mortgage Corporation’s core capital increased by 27 million dollars in 2026 to 1.7 billion dollars, which exceeded our statutory requirements by 663 million dollars, or 62%. Our Tier 1 capital ratio was 13% as of 03/31/2026, compared to 13.3% as of year-end 2025.
Our capital levels remain well in excess of regulatory thresholds following an active quarter where our outstanding business volume grew by 1.5 billion dollars and we returned 32 million dollars of capital through a combination of common and preferred dividends along with modest share repurchases. Our strong capital position has enabled us to grow and diversify our revenue streams, remain resilient through volatile credit environments, and continue providing competitively priced liquidity to our customers and their borrowers. Looking ahead, we will maintain a thoughtful and balanced approach to managing our overall capital position.
Organic capital generation, selective capital issuance, and the use of risk transfer tools will help ensure we have sufficient capital to support future growth, particularly in more accretive segments that are generally more capital consumptive. In closing, we are very pleased with our first quarter results and confident in our outlook for the remainder of the year. We remain committed to thoughtful capital deployment, strong asset quality, and creating long-term value for our shareholders. With that, I will turn the call back over to Brad.
Bradford Todd Nordholm: Thanks very much, Matt. In summary, this was an exceptional quarter and a powerful start to 2026. The strength of our results reflects the disciplined execution and strategic positioning that define Federal Agricultural Mortgage Corporation today. A number of you have asked about CEO succession, and I am pleased to report that the process is progressing very well, and in fact, a bit ahead of schedule. I can say with great confidence that Federal Agricultural Mortgage Corporation has never been in a stronger position than it is today. The depth of talent across our leadership team, the clarity of our strategy, and the momentum in our business give me tremendous optimism and confidence in the future of this organization.
We will now open the call for questions.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star, then one, on your telephone keypad. Your first question comes from Bose Thomas George with KBW. Your line is open.
Bose Thomas George: Hey, everyone. Good afternoon. I wanted to ask first about return on equity expectations. You had a very strong quarter at 17% ROE. With the pipeline and what you are seeing, where do you think that trends? And I wanted to ask about spread as well, but that moves around with mix. Is it better to focus on the ROE outlook?
Matthew Pullins: Good afternoon, Bose. Thank you for the question. In terms of return on equity, as you noted, we printed 17% for the quarter. That is a metric we are very focused on in deploying capital and purchasing assets, and we are looking to maintain the business in that range going forward. On net effective spread margin, that metric can vary quarter to quarter. Several factors weighed on margin this quarter, including asset mix. As we purchase high-return-on-equity but, in some cases, lower-spread assets—particularly in our AgVantage portfolios—that can dilute margin but is accretive to return on equity, which is our principal focus in managing the business and the balance sheet.
Bose Thomas George: And then you noted the potential impact on the farm economy from geopolitical volatility. If this persists, is the bigger focus on what it could do to loan activity, or are there areas from a credit standpoint that you are watching closely as well?
Zachary N. Carpenter: Hi, Bose. The conflict in the Middle East has created more volatility. The impact depends on the duration of the conflict, which has exacerbated fertilizer price increases and could weigh on margins. It also depends on whether a grower pre-purchased inputs prior to the uptick. While that could stress the ag economy and certain borrowers, it could also lead to the need for additional liquidity and capital, and we stand ready to support borrowers as they work through stress. As it pertains to our portfolio, we feel confident with the strength we are seeing in new applications and new loan purchases. Loan purchases in the first quarter had very strong credit scores and solid loan-to-values.
The use of proceeds was typically for refinancings or new purchases, whether land or equipment. While we recognize stresses in certain parts of the ag economy, our diversified model across geographies and commodities helps us be there in both good and bad times.
Operator: Your next question comes from William Haraway Ryan with Seaport Research Partners. Your line is open.
William Haraway Ryan: Hi. Good afternoon, and thanks for taking my questions. Great to see the volume increase that you discussed at Investor Day. First, a follow-up on the margin outlook. From 122 basis points in Q4 to 116 in Q1, if you look at your mix of business in the pipeline going into Q2, do you expect more net pressure on the margin, or do you expect it to stabilize in the next couple of quarters?
Zachary N. Carpenter: Hi, Bill. A couple of comments on net effective spread percentage. Two primary factors this quarter—and both are relatively positive. First, in the fourth quarter we put on almost 700 million dollars of AgVantage volume, which dramatically increased the average daily balance heading into the first quarter. AgVantage is one of our highest returning products from a capital perspective, although the NES percentage is the lowest across our portfolio, so that mix weighed on the percentage. Second, there were two fewer days in Q1 versus Q4, which compressed contribution from our fastest-growing segments—Renewable Energy and Broadband Infrastructure.
Going forward, about 800 million dollars or more of our volume was put on in March, broadly diversified across segments, so we feel very good about the durability of net effective spread heading into Q2. AgVantage can be lumpy and could alter mix, but all operating segments have very strong pipelines. Also, Broadband Infrastructure and Renewable Energy have significant loan commitments; as construction progresses and we fund those commitments, you will see a higher net effective spread in those businesses.
Matthew Pullins: Bill, adding on the liquidity and funding mix dynamics: We had the opportunity to call about 500 million dollars of callable debt when rates dipped in the middle of the quarter. That is ultimately accretive to spread going forward but weighed on spread in the quarter by about 1 basis point due to accelerated amortization of original issue discount. The pickup from rolling down the rate on those called bonds is annualized at a little over 3 million dollars a year, which we expect to begin in Q2. We also continuously evaluate market opportunities to fund the balance sheet in a way that is accretive to returns without taking incremental funding risk.
Portfolio layer method hedging was introduced this quarter; its impact will grow over time and should be accretive to net effective spread. That is an example of the strategies we are deploying as we manage the balance sheet and interest rate risk.
William Haraway Ryan: Thanks for the detail. One other question on data centers. There have been headlines about some delays in data center construction coming online. What are you seeing specifically in your portfolio?
Zachary N. Carpenter: As we discussed at Investor Day, we are very thorough and methodical in the data center transactions we pursue. We will not underwrite unless we are working with top counterparties—developers, sponsors, and tenants—with significant experience constructing and operating data centers. We want power agreements in place, and over 80% of our data center tenant exposure is to two to four top investment-grade hyperscalers. Given market depth, we can focus on the best structures and highest-rated opportunities. We are not speculative; everything—power, water, etc.—needs to be signed and in place before we enter a transaction. That approach limits risk and reduces delays.
As a result, we have seen very few issues related to construction or operational delays, and we do not feel the need to stretch our standards.
William Haraway Ryan: Thanks. One clarification for Matt: You have 30 million dollars of investment tax credit carryback capacity remaining. Do you expect most of that to be recognized in the second quarter?
Matthew Pullins: Our capacity for carrybacks to prior-year income tax liabilities was 30 million dollars as of 03/31/2026, and our expectation is to fully utilize that carryback capacity in the second quarter. Going forward, we will operate on a current-year basis and will monitor market opportunities to potentially monetize additional tax credit purchases on a current-year basis.
Operator: Your next question comes from Brendan Michael McCarthy with Sidoti. Your line is open.
Brendan Michael McCarthy: Good afternoon. Thanks for taking my questions. Starting with net loan volume growth in Farm & Ranch—you mentioned 384 million dollars, which well exceeded last year’s 54 million dollars, and that is net of repayments. Can you dissect what drove that gap relative to last year?
Zachary N. Carpenter: We continue to see an acceleration of loan velocity and applications in Farm & Ranch following a very strong fourth quarter. We had a record quarter of loan applications—about 1 billion dollars—which is roughly 30% above the prior record in 2025, and the pipeline remains robust. Several drivers: First, borrowers’ liquidity and working capital needs to bridge timing gaps—such as between receipt of government payments or crop sales—are one component. Second, our financial institution customers are managing high-cost deposits in this environment and are looking for alternative liquidity sources to support strong loan growth, leveraging the secondary market more broadly. We have broadened our relationships across financial institutions, with a record number of sellers in the first quarter.
We are deepening relationships with existing sellers to find new ways to support borrower liquidity and have a more focused, relationship-oriented approach. We also put a new head of our Farm & Ranch segment in place to drive growth. The combination of relationship expansion, product and platform enhancements, and banks’ focus on capital efficiency is driving incremental share to the secondary market.
Brendan Michael McCarthy: Thanks, Zach. On headline risk—fuel and fertilizer costs spiking ahead of planting—do you have any insight into potential impact on Q2 provisioning?
Zachary N. Carpenter: It is too early to assess any future impacts to the credit portfolio. There are competing factors. The spike in nitrogen prices can stress margins, and it is unknown how many growers pre-locked fertilizer before the season versus buying in the current pricing environment. Conversely, higher fuel prices typically support higher ethanol prices, which we have seen move from about 1 dollar and 80 cents per gallon to over 2 dollars, and that can support higher corn prices. The duration of the conflict will determine the net impact—either margin pressure from higher inputs or relief from higher commodity prices. It is too early to tell.
Brendan Michael McCarthy: Understood. Last one: allowance for losses as a percentage of nonaccrual assets has ranged from roughly 13% to 16–17%. Do you have a long-term target for that ratio?
Matthew Pullins: We do not have a long-term target for that specific ratio. We use it as one way to evaluate reserve adequacy relative to loans where full collection is unlikely, but it is important to consider that our nonaccrual assets are, in nearly all cases, supported by very high-quality collateral. Comparing that ratio to other institutions requires that collateral context. Unlike our efficiency ratio, we do not operate with a target range for allowance as a percentage of nonaccrual assets.
Operator: Your next question comes from Gary Gordon, a private investor. Your line is open.
Gary Gordon: Thank you. Two questions. First, it looks like your charge-offs were about 2 million dollars. Any color on what was charged off during the quarter?
Zachary N. Carpenter: Hi, Gary. No new issues with transactions or borrowers. The incremental charge-off reflects the transaction we discussed in the fourth quarter. These processes are fluid as we work with the bank group and lead arranger on restructuring options, supporting the business going forward, or potential asset sales and liquidations. Timing delays persisted, and we further wrote down to the value we felt appropriate and charged that off. The remaining exposure is manageable and immaterial from an overall portfolio perspective, and we continue to monitor the situation closely.
Gary Gordon: Thanks. Second, on loan growth: you made a bigger marketing effort but it does not sound like you changed underwriting standards. Are you seeing any noticeable changes in competition or more willing sellers for macro reasons?
Zachary N. Carpenter: It differs by segment. In AgVantage, we saw a bottoming in 2025 and have focused on broadening counterparties and closing new facilities, contributing to growth in Q4 and Q1, and we are optimistic that continues. In Renewable Energy and Broadband Infrastructure, pipeline and growth reflect investments in our teams and expertise across business development, credit, and operations, allowing us to take on more high-quality transactions. In Farm & Ranch, growth reflects both the ag environment and our focus on broadening relationships with more sellers, engaging in product and platform enhancements, and banks’ focus on capital efficiency—driving incremental share to the secondary market.
Operator: That concludes our Q&A session. I will now turn the conference back over to Jalpa Nazareth, Senior Director of Investor Relations, for closing remarks.
Jalpa Nazareth: Thank you, everyone, for listening and participating in our call this afternoon. We will have our next regularly scheduled call in August to report our second quarter 2026 results and look forward to sharing more information with you at that time. As always, if you have any questions that you would like to discuss with us, please do not hesitate to reach out. Thank you very much, and have a good day.
Operator: That concludes today’s call. Thank you for attending. You may now disconnect, and have a wonderful rest of your day.
